NZD/USD: Trading the New Zealand Trade Mar 2014

New Zealand  Trade Balance, published each month,  is a key release.   A reading which is better than the market forecast is bullish for the New Zealand dollar.

Here are all the details, and 5 possible outcomes for NZD/USD.

Published on Wednesday at 21:45 GMT.

Indicator Background

New Zealand  Trade  Balance is closely  linked to currency demand, as  foreigners  must purchase  New Zealand  dollars  in order to pay for  the country’s  exports.  An unexpected reading could affect the direction of NZD/USD.

Trade Balance dropped to $306 million in January, but this easily surpassed the estimate of $230 million. The markets are expecting a surge in February, with the  estimate standing at $600 million. Will the indicator again surprise the markets and beat the estimate?

Sentiments and levels

The  fact that the New  Zealand dollar impressed  to end another week higher despite  taking a hit after Janet Yellen’s rate comments  across the board is telling: the tightening cycle in New Zealand has already begun. Even if the US is getting closer to its own real tightening (and not only slower loosening), the advantage that New Zealand has in this round can certainly be reflected for another week. So, the overall sentiment is bullish on NZD/USD towards this release.

Technical levels, from top to bottom: 86.76, 86.40, 85.86, 85, 84.35, and 83.92.

5 Scenarios

1. Within expectations:  $540M  to $660M. In such a scenario, NZD/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: $661M  to $740M: An unexpected higher reading can push the pair above one  resistance line.
3. Well above  expectations: Above $740M: A surge in the reading could bolster the kiwi, and the pair could break a second line of resistance as a  result.
4. Below expectations: $460M  to $539M:  A weak reading could push NZD/USD below one support level.
5. Well below  expectations: Below $460M. In this scenario, the pair could push below a second level of support.

For more on the kiwi, see the NZD/USD forecast.

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